Sales of new U.S. homes tumble 16.9% to record low
WASHINGTON (MarketWatch) — Sales of new single-family homes collapsed in February, the Commerce Department reported Wednesday, as a combination of high unemployment, tumbling prices and a glut of cheaper alternatives brought activity to a near-standstill.
New-home sales fell 16.9% to a seasonally adjusted annual rate of 250,000 in February, though January’s figures were revised higher to 301,000 from 284,000. Compared to February 2010, sales collapsed by 28%.
Every region but the West saw record lows, and in the Northeast, sales dropped by 50% compared to year-earlier levels. Read “Dismal home-sales data tell us nothing new.”
“The housing market has literally collapsed,” said Tony Sanders, a real estate finance professor at George Mason University. “We’re stuck, it’s not going to revive in the spring and may not in the summer.” .
Economists polled by MarketWatch had expected a slight rise to a 290,000 rate in February. While inclement weather may have played a role in the particularly poor showing during the month — the particularly nasty dive in the Northeast and Midwest lends support to such a view — analysts said the figures were reflective of a basically dead market.
“The details of the new-home sales release clearly indicate that the housing market remains incredibly soft,” said David Resler, chief economist of Nomura Securities International.
The new-home sales release is notoriously volatile, and the margin of error is plus or minus 19.1%. The less-volatile three-month average to February was 295,000, compared to 307,000 in January.
Demand for new homes is weak, constrained by still-high unemployment, a slow-growing economy, but most of all the remnants of the house-price bubble, with many owners unable to move due to being underwater on their mortgage.
“There’s massive excess [supply] on the market, interest rates are not at record lows, tighter credit standards, unemployment is not decreasing fast enough and throw in oil and gas prices, that sends a big stop sign on consumers buying homes,” Sanders said.
Furthermore, it’s now far cheaper to buy an existing home due to the glut of foreclosed properties on the market.
The median price of a new home in February was $202,100, a dive of 13.9%, which is the largest one-month percentage drop on record. Even so, the median existing-home price was $156,100 in February.
In Dec. 2007, the first month of the Great Recession, the gap between the price of new and existing homes was far narrower, when a new home fetched $227,700 and a lived-in home cost $207,100.
“The abundance of distressed residential real estate encourages buyers to seek out bargains, which both puts downward pressure on prices (of new and existing home sales) and discourages building new homes,” said Nomura’s Resler.
At the current sales rate, there are supply of 8.9 months, the highest backlog since the 9.1 months in August 2010.